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THE COMPLETE STAMP DUTY AND LAND TAX GUIDE

When it comes to buying a home, there are a lot of expenses you need to take into consideration. Along with legal costs and agent fees, it is likely that you will also have to pay stamp duty or land tax. Here is everything you need to know about how land tax works and how much you will have to pay on your next home.

Stamp Duty Land Tax - England and Northern Ireland

What is Stamp Duty Land Tax?

Stamp Duty - or Stamp Duty Land Tax (SDLT) in official terms - is charged to buyers in England and Northern Ireland when purchasing a residential property or piece of land, that costs more than £125,000, or £300,000 for first-time buyers. This tax applies to both freehold and leasehold properties – whether you’re buying outright or with a mortgage.

How much is Stamp Duty Land Tax?

Purchase Price

SDLT Rate
(Main residence)

SDLT Rate
(Additional Homes)

£0 - £125,000

0%

3%

£125,001 - £250,000

2%

5%

£250,001 - £925,000

5%

8%

£925,001 - £1.5m

10%

13%

£1.5m +

12%

15%

Calculator

SDLT Calculator

HMRC's Stamp Duty calculator will help you work out how much tax you will need to pay.

Use Calculator

Main residence

SDLT is calculated based on the value of the home. The table explains how the rate you pay varies depending on the price of the property.

To help make sense of the price brackets, if you bought a property for £350,000 for example, the Stamp Duty payable would be:

  • 0% on the first £125,000,
  • 2% on the second £125,000 (£2,500), and
  • 5% on the final £100,000 (£5,000)
  • In total, you would pay £7,500.

But-to-let or additional properties

If you are purchasing a property in England and Northern Ireland costing £40,000 or more, which is not considered your main residence, you must pay an increased rate of tax (or additional dwelling supplement) of 3%.

Anything other than your main residence is classed as a ‘second home’ - this could be a holiday let, a property bought as an investment or somewhere you are helping another family member to buy - even if your main home is overseas. This charge does not apply to caravans, mobile homes, houseboats or plots of land.

Whilst Stamp Duty is charged on a tiered basis, the 3% surcharge effectively works as a slab tax. This means that, if you buy a second home with a purchase price of £300,000, the additional surcharge would be £9,000 (3% of the entire price). This is in addition to the £5,000 Stamp Duty bill that would need to be paid on a home of this value, bringing the total payable to £14,000.

It is important to remember that if the property you are buying replaces your main residence, you will not be liable for the 3% surcharge, even if you own additional properties (such as a second home or a flat you rent out) at the same time. However this can be a complex area and you should seek advice from a solicitor or conveyancer.

Joint ownership and Stamp Duty

If you already own a property and then jointly buy a property with a friend or partner, before selling your existing main residence, the 3% surcharge may still apply, regardless of whether your partner also owns a home or not. You may however be able to claim this back, as long as you meet the criteria terms.

What if I’m a first-time buyer?

Following the 2017 Autumn Budget, SDLT was scrapped for first time buyers in England and Northern Ireland, on properties up to the value of £300,000.

A reduced rate of tax will be applied for properties up to £500,000, where first time buyers will pay 5% tax on the difference.

So, to break it down, this means that if you’re purchasing your first home at a cost of £350,000, the Stamp Duty payable would be 0% on the first £300,000, and 5% on the remaining £50,000 (£2,500) – so in total you would pay just £2,500.

In the 2018 Autumn Budget Statement, the Chancellor of the Exchequer announced that all first time buyers of Shared Ownership properties would also be able to benefit from the Stamp Duty relief. The relief was applied retrospectively, meaning that first-time buyers who have bought a Shared Ownership home since 22 November 2017 are eligible to claim back any Stamp Duty paid on the initial transaction.

How and when do I pay Stamp Duty Land Tax?

Stamp Duty must be paid to HMRC within 30 days of taking possession of your new property. In most cases your solicitor or conveyancer should be able to help you with this but if not, you will need to contact HMRC directly to make the payment.

HMRC accept several different payment methods including by phone, online at your bank or building society, at the post office or you can pay by cheque. More info...

If you fail to make payment within 30 days, HMRC may charge you a penalty fee and/or interest.

Additional rate refunds

If you purchase a new home but there’s a delay in selling your previous residence, you will still be liable to pay higher Stamp Duty rates for additional properties as you’ll now own two properties.

However, you can request a refund for the amount above the normal Stamp Duty rates if:

  • you sell your previous main residence within three years, and
  • you claim the refund within three months of the sale of your previous main residence, or within 12 months of the filing date of your self-assessment tax return, whichever comes later.

Visit gov.uk details on how to apply for a refund of higher rates stamp duty.

Are there any exemptions?

You may be eligible for tax relief in certain situations, which can reduce the amount you pay.

For example, SDLT doesn’t apply if you have been left a property in a will or receive it as a gift – however other taxes might apply (such as inheritance tax). You will also be exempt if the property has been transferred to you following a divorce, separation or the end of a civil partnership.

Visit the gov.uk website for the full list of Stamp Duty exemptions.

 

Land and Building Transaction Tax - Scotland

What is Land and Building Transaction Tax?

In Scotland, when you buy a property or a piece of land that costs more than £145,000 you will pay Land and Buildings Transaction Tax (LBTT) instead of Stamp Duty.

How much is Land and Building Transaction Tax?

Property Cost

LBTT Rate
(Main residence)

LBTT Rate
(Additional properties)

£0 - £145,000

0%

3%

£145,001 - £250,000

2%

5%

£250,001 - £325,000

5%

8%

£325,001 - £750,000

10%

13%

£750,000 +

12%

15%

Calculator

LBTT Calculator

Revenue Scotland's LBTT calculator will help you work out how much tax you will need to pay.

Use Calculator

Main Residence

LBTT in Scotland, like in the rest of the UK, is calculated on a percentage basis, however, the thresholds are slightly different. The table sets out the tax percentage you will pay for each price band.

Buy-to-let and additional properties

Like with Stamp Duty in England, an additional amount of Land and Buildings Transaction Tax (LBTT), known as the Additional Dwelling Supplement (ADS) must be paid on purchases of additional properties in Scotland costing more than £40,000, where the purchaser is not replacing their main residence, such as buy-to-let properties and second homes.

Affected transactions will result in an additional 3% blanket tax being charged on the full purchase price of the transaction. For example, if you buy a second home with a purchase price of £300,000, the additional surcharge would be £9,000 (3% of the entire price). This will need to be paid in addition to the £4,600 LBTT bill that would need to be paid on a home of this value, bringing the total amount payable to £13,600.

Joint ownership and Stamp Duty

If you decide to purchase a home with a partner or a friend before selling your existing main residence, as with the rest of the UK, you will be liable to pay the additional 3% surcharge however you may be able to claim this back if you meet the refund criteria.

What if I’m a first-time buyer?

As of 30 June 2018, first-time buyers in Scotland are exempt from paying Land and Buildings Transaction tax on properties up to the value of £175,000.

This means that if you’re purchasing your first home at a cost of £300,000, the Stamp Duty payable would be 0% on the first £175,000, 2% on the next £75,000 (£1,500) and 5% on the remaining £50,000 (£2,500) – so in total, you would pay just £4,000.

How and when do I pay LBTT?

Your solicitor will usually make the arrangements for your LBTT to be paid, however if they don’t, land tax returns can be submitted using Revenue Scotland's online portal, or manually by completing a paper LBTT form and paying by cheque. Revenue Scotland does not accept payment over the telephone or by cash. If you fail to make payment within 30 days of taking possession of your new property, you will be charged a penalty fee. Full details of how to make a payment can be found on the Revenue Scotland website. More info...

Additional Rate Refunds

In the instance that ADS has been paid prior to your previous residence being sold, to qualify for a refund you must have bought a dwelling which you intended to inhabit as your main residence and; dispose of your previous main residence within an 18-month period (beginning with the day after the effective date of the next main residence purchase transaction) and; there must have been only one owner on the title deeds of the previous main residence.

You can claim a repayment for ADS via the SETS portal, by amending your original LBTT return, or by completing a repayment claim form and returning it to Revenue Scotland.

Are there any exemptions?

There are several types of land transactions which are specifically exempt from LBTT or that offer tax relief.

If a piece of land or a building has been gifted, or the ownership transferred to you (like in a will for example) you will not have to pay land tax. You will also be exempt if the property has been transferred to you as a result of divorce, separation or the end of a civil partnership.

Take a look at the Revenue Scotland website for the full list of Land and Building Transaction Tax exemptions.

 

Land Transaction Tax - Wales

What is Land Transaction Tax?

From April 2018, Land Transaction Tax, or LLT for short, replaced UK Stamp Duty and is the levy all buyers must pay when purchasing a property in Wales costing more than £180,000. 

How much is Land Transaction Tax in Wales?

Purchase price

LTT Rates
(Main residence)

LTT Rates
(Additional properties)

£0 - £180,000

0%

3%

£180,001 - £250,000

3.5%

6.5%

£250,001 - £400,000

5%

8%

£400,001 - £750,000

7.5%

10.5%

£750,001 - £1.5m

10%

13%

£1.5m +

12%

15%

Calculator

LTT Calculator

Calculate the amount of tax you will have to pay using the Welsh Revenue Authority's tax calculator.

Use Calculator

Main residence

Land tax in Wales, like in the rest of the UK, is calculated on a percentage basis, however, the thresholds are slightly different. The table sets out the tax percentage you will pay for each price band.

Buy-to-let and additional properties

In Wales, buyers purchasing an additional residential property costing more than £40,000 will incur a 3% surcharge.

For example, if you buy a second home for £300,000 you will pay 3% on the first £180,000, 6.5% on the next £70,000 and 8% on the final £50,000, with the total LTT fee amounting to £13,950.

Joint ownership and Land Tax

If you already own a home and decide to jointly buy an additional property with a partner or a friend before selling your main residence, you are likely to be liable to pay the higher rate of tax. However, you may be able to claim a repayment if the relevant conditions are met.

How and when do I pay LTT?

Your solicitor should be registered with the Welsh Revenue Authority, who are responsible for collecting Land Transaction Tax and will be able to make the transfer on your behalf, as part of the conveyancing process.

Additional rate refunds

If you make your second home your main residence within 36 months of buying it (meaning you sell the first property) you will be able to claim back the higher rates you paid. This can be done by contacting the Welsh Revenue Authority and providing them with the below:

  • the Unique Transaction Reference Number (UTRN);
  • the taxpayers name;
  • the taxpayers Address;
  • your reason for a refund/amendment;
  • a description of any amendments to the return;
  • whether the amendment alters the amount of tax due;
  • the effective date of the amendment/repayment claim;
  • the amount to be repaid;
  • the name of the account holder;
  • your bank/building society account number;
  • your branch sort code;
  • the name of your bank or building society; and
  • the address of your bank or building society.

You will also need to include a declaration to confirm that you have the authority, or have been authorised to complete this amendment, on behalf of the buyer(s) and certify that the buyer(s), has/have declared that the information provided is to the best of their knowledge correct and complete.

Are there any exemptions?

There are five transactions which are exempt from LTT, these include acquisitions by the Crown, transactions in connection with a divorce or dissolution of a civil partnership, and where a property has been gifted.

You can find the full list of Land Transaction Tax exemptions on the Welsh Government website.

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